After announcing that the Faculty budget deficit was $4.2 million less than anticipated, Dean of the Faculty Jeremy R. Knowles thanked professors for their painstaking efforts to shoulder the budget burden.

Knowles may as well have thanked elements beyond his immediate control: the Gulf War, the economy, the U.S. Federal Reserve Board of Governors and those who misforecast the budget in the first place.

The fiscal 1992 numbers may have been "better-than-expected," but there's reason to believe that the improvement is just a one-year blip on the chart.

Knowles notes that the deficit fell from $9.8 million in 1990-91 to $7.5 million last year, giving him "cautious optimism" that he can erase the deficit entirely in a few years.

The dean may want to be more cautious than optimistic. Throwing out the low interest rates and low inflation that Knowles admits helped cut the deficit, the Faculty's real "savings" last year may not have amounted to much more than $1 million.

Indeed, Knowles may have to start talking about painful cuts that hit students and faculty more directly to eliminate the budget shortfall.

The dean was not specific about how much was saved in what areas to emerge with a budget shortfall of $7.5 million instead of the projected $11.7 million, but it is clear that administrative cost-cutting efforts have not been a panacea.

Knowles offers several reasons accounting for the $4.2 million in "savings" from the projected deficit.

Belt-tightening measures saved $300,000 last academic year, the dean says. That adds up to less than two-tenths of 1 percent of a $180 million operating budget--and it still leaves $3.9 million to be accounted for in "savings."

Some of that comes from attrition. Thirty employees from the administrative and support staffs are no longer in the Faculty, ten opting for last fall's early retirement program, the other 20 either transfers to other Harvard faculties (a zero-sum gain for the University) or people who left under other circumstances.

Even if all 30 employees are counted as "savings," that probably adds up to less than $1 million (figuring $30,000 a staffer), which still leaves Knowles with roughly $3 million in savings to collect. Fortunately--for Knowles, at least--Saddam Hussein invaded Kuwait and the economy tanked.

.Fuel costs for the Faculty were lower than expected, since the budget forecast was prepared early in the Gulf War, according to Knowles.

.The Fed lowered interest rates, giving the Faculty an opportunity to refinance some of its loans on buildings and renovations.

.Because of low inflation, the average cost-of-living increase in faculty and administrative salaries was lower than expected.

(Support staff salaries--including those of Harvard Union of Clerical and Technical Workers members--do not fall under the Faculty pay-raise system.)

A little simple arithmetic, then, shows that much of the Faculty's "savings" last year are one-time events.

Interest rates and inflation are unusually low, meaning future borrowing will probably be more expensive and cost-of-living increases won't be as low as last year. Fuel prices aren't probably won't be falling either.

Knowles hails the administrative cost-cutting efforts--which include such draconian measures as reduced photocopying--as "very commendable." But these savings were a paltry $300,000, and it remains to be seen how much more can come from voluntary efforts.

The dean will likely also have trouble trimming many more faculty and staff positions than he already has through attrition and transfers.

In other words, between belt-tightening and attrition, the dean has cut about $1 million in "fat," and there's not much left.

Until now, Knowles has not talked about making cuts that would hurt academic programs, and the recent numbers have given him more confidence that he can avoid painful cuts. "If we're on this track, I really have some hopes," he says.

He still won't speculate about further costcutting measures, instead preferring to encourage faculty members to stay steady on course to net more savings.

The question is, if this year's improvement does turn out to be a one-year blip, then what happens next year? If the deficit grows back to nearly $10 million, Knowles may face the prospect of making truly draconian cuts.